Murphy USA (MUSA) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q4 2020 was $2.9 billion, down from $3.5 billion in Q4 2019, and full-year revenue was $11.3 billion compared to $14 billion in 2019, primarily due to lower retail gasoline prices and lower gallons sold due to COVID-19 [29][30] - Adjusted EBITDA for Q4 2020 was $136.3 million, up from $112.4 million in Q4 2019, and for the full year, it was $722.7 million compared to $422.6 million in 2019, driven by higher average retail margins and merchandise contributions [30][31] - Net income for 2020 was $386.1 million, significantly higher than $154.8 million in 2019, with an effective tax rate of 24.4% for Q4 and 24.2% for the full year [32] Business Line Data and Key Metrics Changes - Fuel volume in Q4 showed a 6% decrease year-over-year, with January volumes down about 8% attributed to rising prices [17][18] - Same-store sales increased nearly 10%, with same-store merchandise contribution up nearly 11%, driven by both tobacco and non-tobacco categories [20][21] - The company plans to open up to 50 new 2,800-square-foot stores in 2021, expecting continued outperformance from these larger formats [22] Market Data and Key Metrics Changes - Average retail gasoline prices per gallon were $1.87 in Q4 2020 compared to $2.31 in Q4 2019, and for the full year, prices averaged $1.91 versus $2.33 in 2019 [29] - The company expects higher than normal retail margins to persist in 2021, benefiting from market dynamics [19] Company Strategy and Development Direction - The acquisition of QuickChek is seen as a strategic move to enhance capabilities and drive future growth, with a focus on integrating best practices rather than rapid cost synergies [9][12] - The company aims to maintain capital discipline and shareholder-friendly practices, having paid its first dividend in December 2020 and setting a record for share repurchases [15] - The strategic focus includes enhancing food and beverage offerings and leveraging QuickChek's strengths to improve overall business performance [12][55] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for growth in 2021, citing strong customer insights and competitive dynamics as key drivers [10][41] - The company anticipates that fuel margins will remain elevated, benefiting from the current market structure [40] - Management highlighted the importance of maintaining a conservative balance sheet while pursuing growth opportunities [76] Other Important Information - Total debt as of December 31, 2020, was over $1 billion, with a leverage ratio of approximately 1.4x [33] - Capital expenditures for 2020 were $227 million, with plans for increased spending in 2021 to support growth initiatives [36][37] Q&A Session Summary Question: Guidance on $550 million adjusted EBITDA - Management indicated that the $550 million is a starting point for growth, with expectations for continued improvement and synergies from the QuickChek acquisition [60][65] Question: Capital allocation priorities - Management emphasized a focus on growth opportunities while balancing debt pay-down and share repurchases, with a preference for growing earnings to reduce leverage [67][76] Question: QuickChek acquisition milestones - Key milestones include sharing best practices and leveraging QuickChek's food and beverage expertise to enhance Murphy USA's offerings [84][86] Question: Tobacco category performance - Management noted that customer behaviors have shifted during COVID, and they expect to maintain and grow market share in the tobacco category [96] Question: Fuel volumes and outperformance - Management attributed strong fuel volume performance to improved pricing strategies and location advantages [101][102] Question: Non-tobacco merchandise sales outlook - Management expressed optimism about non-tobacco sales, particularly in categories like packaged beverages and grab-and-go food items [110][111] Question: Electric vehicle market preparation - Management acknowledged the long-term impact of electric vehicles but emphasized that current customer demographics may not shift significantly in the near term [114][119]